What is the amount added to capital assets in 2028 for the Sunset project?

• A. 2,000,000
• B. 2,050,000
• C. 2,100,000
• D. 2,150,000

Answer: (B)

In government accounting, the amount added to capital assets during a construction project is the total of all costs that meet capitalization criteria—costs necessary to bring the asset to working condition. For the Sunset project in 2028, that means summing direct construction costs, design and engineering fees allocated to construction, site preparation, and any capitalizable interest incurred during construction. Routine maintenance and costs that don’t contribute to bringing the asset to usable condition aren’t capitalized; they’re expensed.

If the 2028 costs that qualify for capitalization total 2,050,000, that is the amount to put into the capital asset (often via construction in progress, then transferred to a fixed asset once the asset is placed in service). For example, 2,000,000 of construction expenditures plus 50,000 of interest capitalized during construction would yield 2,050,000. The other options would result from omitting a capitalizable component (like interest) or including non-capitalizable items, which would not correctly reflect the costs necessary to bring the asset to use.